AI hits Europe
The growing use of AI in Europe is adding pressure to an already-stretched data centre construction supply chain.
Data centre capacity in Europe is exploding. On average, the operators we surveyed for this report commissioned 33MW of data centre capacity in 2024. This is more than twice the average in last year’s survey (16MW) and substantially more than last year’s respondents had expected to commission (26MW).
And this growth will continue in 2025: operators expect to commission 47MW, on average, this year. If that proves to be the case, this figure will have nearly tripled in just three years (Figure 1).
Figure 1. Data centre operators are rapidly expanding their capacity
How many MW of data centre capacity did your organisation commission in 2023* and 2024? And how many do you expect it to commission in 2025? (% of operators)
* Source: RLB Data Centre Trends Report 2024
This rapid increase reflects the growing scale of data centre projects. Ten years ago, demand for capacity was driven by colocation providers. Now, it is led by hyperscalers seeking ever more space and power in their facilities, and projects with 100MW of capacity or more are increasingly common.
But operators are not just planning new sites: 66% plan to retrofit at least a quarter of their data centre estate in the next five years, with 20% expecting to retrofit more than half. A wave of data centre leases signed 10 years ago are now nearing expiration, and operators are eager to retool their facilities for a high density of workloads.
This will allow them to pack more capacity into their existing sites, explains Stephen Byrne, Director of Business Development, Data Centres, at Irish contractor Mercury Engineering. “We believe there will be a lot of retrofitting activity in existing facilities over the next five years.”
Housing the AI boom
There is no doubt what’s behind this growth. IT analyst company IDC predicts that AI spending in Europe will grow 30% annually, reaching $133bn by 2028. Given AI’s high compute and power requirements, this is driving a data centre boom.
“If you go back 12 or 18 months, AI was happening in the US but there was a bit of a lag before it arrived in Europe,” recalls Byrne. “But in the past year, it's really hit Europe.”
This year, our survey respondents identify AI as the greatest driver of data centre demand in the next five years, overtaking last year’s top answer, cloud computing (Figure 2).
Figure 2. AI has eclipsed cloud computing as the primary driver of demand
Which of the following trends do you expect to be the greatest drivers of data centre demand in Europe in the next five years? (% of respondents)
Associated technologies, including edge and quantum computing, are also rising in prominence, our survey shows, while internet applications such as e-commerce and social media have fallen down the rankings.
That said, conventional workloads are not being replaced by AI. Instead, the new computing paradigm is adding demand to an already growing data centre sector.
AI’s impact on demand for capacity in Europe is intensified by industry trends, notably the growing recognition of data centres as an investible asset class and an influx of private equity (PE).
This has increased the financial scrutiny of construction projects, says Byrne. “Private equity has brought a whole new layer of financial competence and questioning to the process.”
But it has also attracted more developers to the market and increased the pace and scale of development. As a result, demand for data centre construction materials and infrastructure has intensified – 63% of our respondents agree.
The supply chain squeeze
In fact, the data centre construction supply chain is under increasing strain: 70% believe it is struggling to meet demand.
For some, this jeopardises the sector’s ability to meet growing demand: 53% say that supply chain constraints will prevent Europe’s data centre industry from building enough capacity. And 54% believe that Europe will fall behind on AI unless these constraints are resolved.
Others are more positive. “I have an inherent belief in the flexibility and adaptability of the construction sector,” says Ross Baylis, Vice President, Commercial, at global data centre developer STACK Infrastructure. “We will find a way to make it work.”
Even so, supply chain constraints will hit some businesses harder than others. Byrne explains: “Developers who support the hyperscalers – and the hyperscalers themselves – are going to have first choice from the supply chain. Naturally, suppliers will gravitate towards a safer bet.
‘‘But more recent entrants will struggle in terms of competition and price, due to the scale of activity already in play and the pressure on the existing supply chain.’’
Intense demand – especially for contractors with the experience and capability to build facilities of 100MW or more – is also changing the power dynamics in the supply chain, says Nancy Lamb, a solicitor specialising in data centre construction at international law firm arch.law.
“Contractors used to take on a lot of the risk inherent in employer’s data centre design,” she explains. “Now they are saying, ‘I don’t need to take that risk anymore'.”
As a result, developers must take greater responsibility for ensuring that their designs don’t contain any flaws or oversights that might disrupt construction, Lamb adds. They must also bring their chosen contractors into the design process earlier to assess the viability of their designs.
All of this means that to deliver data centre projects on time and on budget, and to satisfy their investors’ exacting demands, developers and operators must carefully manage an increasingly complex and volatile supply chain.
Can an office become a data centre?
The need to create new capacity quickly and sustainably has prompted some operators to retrofit alternative sites as data centres.
Our respondents consider office buildings to be the ideal sites to repurpose as data centres. The appeal is understandable: locating a data centre close to other businesses – especially in financial centres – could offer high performance in areas of intense demand.
However, our experience is that retrofitting offices as data centres is challenging. First, the project may fall foul of planning and zoning restrictions.
Second, office buildings are not typically equipped with the electrical infrastructure required by a data centre. Fixing this is especially complex if the data centre takes up just part of an office building, meaning that the power infrastructure for the data centre needs to sit side-by-side with conventional office power systems.
Instead, warehouses and factories – with their existing power infrastructure and industrial zoning – are more suitable sites for conversion.
Figure 3. Buildings that would make good data centres
Which building types do you think offer the most potential to be reused as data centres? (% of respondents)
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